By Naagesh Naaraayana Microfinance Focus, Aug. 6, 2009: The SHG-Bank linkage program that evolved in India as a micro-credit model has proved successful in southern states but failed to achieve its goal to benefit poorer states, says an occasional paper by Pankaj Kumar and Ramesh Golait titled ‘Bank Penetration and SHG-Bank Linkage Programme: A Critique’, published by RBI this month. The report says, "SBLP was conceived to fill the existing gap in the formal financial network and  extending the outreach of banking to the poor. However, the present distribution of the SBLP is skewed against the poorer regions of the country. While less than one-fifth of total loans to SHGs went into the Eastern and Central Regions taken together, they accounted for more than three-fifth of the total poor in India." Introduced in 1991-92, the SHG-Bank linkage program (SBLP) reached 3.4 million as of March 2008, received Rs. 22,268 crore in credits, benefitted 4.1 crore poor households in gaining access to the formal banking system. While the number of beneficiary SHGs shot up from from 32,995 in 1998-99 to 34,77,965 in 2007-08 or recording a two-third rise, the banks have almost doubled their cumulative loans to SHGs each year, the paper said. In turn the it has led to a four-fold increase in the average loans per SHG from Rs. 16,816 in 1999-2000 to Rs. 63,926 in 2007-08. Even the SHGs per lakh population varied in southern and eastern states. As of March 2008, 891 SHGs in Andhra Pradesh and 435 in Kerala benefitted while Assam accounted for 3.1% of the total SHGs and the rest of the six States had a negligible share. Since the impact of the SHG model is uneven, the paper suggests remedial measures like performance-linked incentives to banks, creation of specific funds to address the regional imbalances in the SBLP, formation of SHGs around activities of rural infrastructure such as construction and renovation of minor irrigation tanks, feeder channels and rural roads. "The aftermath of nationalisation witnessed a remarkable spread of the banking system to the unbanked and under-banked rural areas. However, the dependence on informal sources of credit has not decreased in rural areas. The problem accentuated as banks veered away from rural to urban India. The relative decline of commercial banking network in the rural areas runs contrary to the objective of financial inclusion and is a formidable challenge in the way of faster and more inclusive growth," remarked the authors. The other activities suggested in the paper suggested included embedding livelihood activities, micro-insurance and grain banks in the SHG model to make it successful across all the states in the country.